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What is the value of the stock ex-rights

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Reference no: EM133100423

Question - Mitsi Inventory Systems Inc. has announced a rights offer. The company has announced that it will take four rights to buy a new share in the offering at a subscription price of $30. At the close of business the day before the ex-rights day, the company's stock sells for $50 per share. The next morning you notice that the stock sells for $46 per share and the rights sell for $2 each.

Required -

What is the value of the stock ex-rights?

What is the value of the rights?

Are the rights underpriced or overpriced?

What is the amount of instant profit you can make on ex-rights day per new share?

Reference no: EM133100423

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